Harvard Business School is keenly studying Bengaluru-based Nova Specialty Surgery’s (Nova) business model; insurance companies like working with it; patients and doctors have significant financial benefits. Everyone’s interest is triggered by the fact that Nova, a chain of standalone short-stay (ambulatory surgery) surgical and IVF (In vitro fertilisation) centres, helps patients save almost 20 per cent on healthcare costs when compared to what they would incur in other 100-bed hospitals in the country. Nova achieves this by focusing on minimal invasive surgery by using modern technology (which minimises blood loss, damage to near-by tissues, inflammation and shortens the recovery time of a patient) and by eliminating unwanted space in the building premises. What is also interesting is the fact that Nova develops its surgical centres in partnership with surgeons across India.

Nova was setup in 2009 with an aim to provide quality care that is affordable and convenient. It received a total funding of US $ 40 million from New York-based private investment company GTI Group LLC, Dr. Mahesh Reddy (co-founder), leading global venture capital firm New Enterprise Associates (NEA) and OMZEST Group spearheaded by Dr. Omar Bin Abdul Muniem Al Zawawi, a political advisor to the Sultan of Oman. Within two years of inception, Nova has grown its operational centres to 15 (including 5 IVF centres) across six cities in India and one in the Middle East. This number is slated to rise in the next 30 months. It plans to have 25 specialty surgery centres and 30 IVF centres which will boost its topline growth. “Nova will close the current fiscal with an exit run rate in excess of Rs. 100 crore. In 2013, our revenue target is Rs. 250 crore,” says Suresh Soni, chief-executive officer and chairman.

From the Nova stable

Nova has a disciplined patient admission criterion. “We strictly schedule outpatient and short-stay surgeries with no emergency or polytrauma,” says Soni. It can cover almost 70 per cent of the surgical care that a 100-bed hospital offers its patients. But the company has consciously decided not to enter medical services and offers only diagnostics and surgical services. “Newer modalities and concepts are being introduced by several corporate groups to make healthcare in our country more efficient, accessible and affordable. Hence, it is all the more important to think out of the box. By focusing on short-stay surgical care, Nova has been able to significantly reduce the footprint of a typical hospital that provides such medical services,” says Soni.

Its specialties include orthopedics, gynecology, general surgery, oncology, gastroenterology, urology, ENT, ophthalmology, bariatric surgery, pediatrics, plastic surgery and vascular surgery. It has pathological laboratories, doctor’s outpatient clinics, health checkups, pharmacy and radiology services. To further capitalise on the day care procedure opportunity, the company entered the IVF sector in August 2011 by acquiring 51 per cent stake in Pulse Women’s Hospital, owned by Dr. Manish Banker. It has created a chain of Nova Pulse IVF clinics in Ahmedabad, Bengaluru, Mumbai, Delhi and Dubai. “We are the only institution with a national chain for IVF,” says Soni. The company is in the process of finalising an agreement with a Europe-based IVF group, a leading player in reproductive medicine and IVF.

Encouraging ownership

Nova offers partnership in the business to its doctors. Each Nova centre is a 70:30 partnership between the company and its 30 – 40 surgeons, where the participating doctors can invest anywhere between Rs. 5 lakh to Rs.10 lakh each. Soni says, “Doctors almost receive 30 per cent of the surgical package, have a monthly profit share and a significant equity appreciation.”

Nova also has an asset-light model with long term leased properties. “By eliminating unnecessary space and focusing on good equipment and doctors, we make the patient pay less,” says Soni. Its facilities requires about 80 per cent less space when compared to a corporate hospital, as a result its cost of setting up a centre and its monthly operating costs ( US $75,000 to US $90,000) are significantly lower. Each Nova centre costs Rs. 10 crore to Rs. 15 crore to build and supports around 550 procedures in a month.

It operates in a 12,000 to 15, 000 sq. ft. facility with five operating rooms and 20 beds, including six pre and post operative overnight rooms and needs only around 35 administration and support staff. However, according to Soni, a corporate hospital requires around 300 staff to work in their 60,000 to 70,000 sq. ft. facility with the same number of operating rooms as Nova’s. It also has a tie-up with almost all insurance companies and does not have the requirement of a mandatory 24-hour stay.

A centre is also able to discharge its patients sooner and hence does not need many rooms. “But this is not at the cost of service,” clarifies Soni. “If a patient needs to go through a surgical procedure which requires a stay of two to three days in a normal hospital, we reduce the number of days by using advanced techniques,” adds Soni. By adopting the latest surgical techniques and installing the best in class equipment, Nova provides quality care that is affordable and convenient. It uses equipment like holmium laser for urology, endovision system for orthopedic and general surgery procedures. It is also equipped to handle emergencies and complications and has provision for round the clock treatment. Some examples of such surgeries done in Nova include shoulder and  knee arthroscopy, total knee and hip replacement, hysterectomy, gall bladder stones, hernia repair and spine surgery.

Inviting doctors to the fold

Nova’s fundamental premise is good technology. “We do not have huge establishment cost and we need people to recognise that,” says Soni. So, making experienced doctors leave big institutions and join Nova, which is comparatively small in size but has good facilities, is a challenge. Doctors, who join the company, are by invitation and have 10 – 15 years experience in their field. “We invite well-known doctors with a standing in the community. Once they join us, we are sure they will like working with us,” says Soni. He adds, “We also currently allow doctors to join us without the investment option. But over a period of time, we will remove this choice. We would like our doctors to be part owners,” shares Soni. Currently, Nova has around 400 surgeons associated with it across the country.

In the future

Nova’s aim is to focus on delivering quality healthcare at affordable prices under a profitable business model and offer good returns to all its stakeholders; patients, doctors, insurance companies, the society and its share holders. And to facilitate this, over the next two years, Nova aims to have 150 operating rooms, perform over one lakh surgeries, have close to 30,000 to 40,000 IVF cycles and over 2,500 surgeons associated with it. It also plans to enter the Tier-II and Tier-III cities and expand in the Middle East market. It is exploring opportunities in Saudi Arabia, UAE, Kuwait and Qatar. “We are also looking at the south-east Asian counties,” shares Soni. To fund its expansion plans, the company is looking at a series B funding round to the tune of US $60 million.

The ambulatory care market is a US $ 5 billion ambulatory care market (US $ 4 billion for specialty surgery and US $ 1 billion for IVF), which is growing at a CAGR of 25 per cent. With a vision of being the global destination for short-stay surgical care, Nova is all set to capitalise this opportunity.

What next?

• Expand to 25 specialty surgery centres, 30 IVF centres and 150 operating theatres by 2014
• Enter the Tier-II and Tier-III cities
• Expand its centres in the Middle East market